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Facebook, Google put on spot over revenue

August 23, 2017

(Australian Associated Press)

Internet giants Facebook and Google have been grilled about how much they really earn in Australia during a parliamentary inquiry into corporate tax avoidance, amid concerns about an “extraordinary discrepancy”.

Representatives from both companies gave evidence on Tuesday that they had restructured their operations in order to comply with multinational tax avoidance laws recently passed by the Australian parliament.

But crossbench senator Nick Xenophon said evidence to a separate Senate committee in Sydney on Tuesday into the future of journalism from academics at the Melbourne Business School suggested an “extraordinary discrepancy” between what Facebook and Google say their revenues are in Australia.

The evidence suggested half of Australia’s $18 billion advertising market was digital, with Facebook and Google accounting for 75 per cent, putting their revenues in Australia around $6 or $7 billion.

Asked by Senator Xenophon whether Facebook’s numbers accurately reflected the advertising revenue received in Australia, the company’s vice president of tax and treasury Ted Price insisted the figures were “very credible”.

He said advertising on Facebook processed by the company’s Sydney or Melbourne offices generated revenue of $327 million in 2016, with the company paying $3.3 million in tax.

That compared to a revenue of $33.6 million before the new tax avoidance laws came into effect, with tax payable of just $815,000.

Google said its Australian advertising revenue was $1.14 billion in 2016, with director of international tax, Damon Richardson, insisting that figure was audited by an external firm.

“We’re paying the appropriate amount of tax that we believe is correct here in Australia,” he told the committee.

Both companies are currently being audited by the Australian Taxation Office.

Meanwhile, Apple told the committee its tax arrangements in Australia had been given the tick of approval by authorities following a long-running audit.

The company’s managing director said a five-year audit by the ATO had concluded with no penalty imposed.

The ATO found Apple’s taxes were up to date, he said, and the company was committed to keeping authorities abreast of any changes.

“There are no issues of dispute between Apple and the ATO,” Tony King told the committee.

The inquiry is seeking to find out whether Australia’s current tax laws are adequate and companies are complying with existing laws.

Mr King said Apple had a straightforward business model in Australia, insisting the company recorded all its transactions and revenue locally.

“We are a compliant taxpayer everywhere that we operate in the world,” Mr King said.

He said over the five years the audit was conducted, Apple paid $630 million of tax in Australia, including $120 million in 2016.

ATO Commissioner Chris Jordan said the new multinational tax avoidance laws were expected to return sales in Australia worth more than $7 billion annually.

“That’s $7 billion in sales booked and the appropriate profit of these activities in Australia will be taxed in Australia for the first time,” he said.

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